"Risk sentiment dominated as fighting in Iraq intensified. US stocks fell, volatility rose, US yields eased and the AUD and NZD underperformed alongside emerging market currencies,"
-ANZ
The Australian Dollar stood around this week's low on Tuesday, a level around 100 pips below its two-and-a-half month high seen on Monday. Expectations of the upbeat U.S. statistics and dovish RBA added pressure on the pair and pushed it to 0.9361. Nonetheless, we can expect another rally to a strong resistance at 0.9462, as short– and medium-term technicals are sending ‘buy' signals.
The RBA is unlikely to move interest rates on Tuesday, however, policymakers can fire another shot in their war of words to talk down the Aussie. Keeping in mind recent appreciation, the RBA is likely to refer to its "uncomfortably high" level of the Australian Dollar. The warning was repeated in November and December, however, after a move below 90-mark in January, the RBA dropped off the statement. The latest minutes showed that policymakers are concerned about the fact the Aussie stands at "high by historical standards" level, especially, keeping in mind further decline in commodity prices and slower pace of growth. Additionally, refreshed Middle East tensions enhanced Aussie's safe haven status, also pointing at further appreciation. Nevertheless, we expect another round of "jawboning"- comments designed to talk down the currency during next week's meeting. Therefore, fundamental analysis is speaking in favour of AUD/USD depreciation, with 20-day SMA at 0.9355 as a potential target.
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